Australia Submarine Import and Export Behavior

Imports

In 1982, the Australian government decided to replace its aging Oberon-class submarines. Several foreign ship-building companies submitted proposals, including Howaldtswerke-Deutsche Werft (HDW), Thyssen-Nordseewerke (TNSW), Kockums Submarine Systems AB (Kockums), Cantieri Navali Riuniti (CNR, now Fincantieri), Rotterdamsche Droogdok Maatschappij (RDM) and Vickers Shipbuilding and Engineering Ltd (VSEL, now part of BAE Systems). Kockums and HDW were short-listed. The Australian government required domestic construction — including the use of local contractors — in order to facilitate significant technology transfer. As a result, Australia would gain the industrial capacity to build, service and modernize submarines indigenously. [1]

In 1987 Australia chose the design of Sweden's Kockums, and decided to build six Collins-class submarines. The contract was awarded to the Australian Submarine Corporation Pty Limited (ASC), which Kockums founded with Australian partners in order to foster domestic construction. The Swedish company initially held 30% in ASC; the state-owned Australian Industry Development Corporation (AIDC) possessed 25%; and two private Australian entities held the remaining 45%. In early 1990, the latter companies sold its shares to Kockums and AIDC. [2] As the Australian government required majority ownership to remain in Australian hands, James Hardie Industries Ltd (JH) acquired 2.5% from Kockums, guaranteeing an Australian majority position in ASC with AIDC and JH holding a total of 51%. [3]

The submarine deal was controversial from the start, due to allegations of irregularities in the selection of Kockums. [4] For example, the media reported that navy officials had undertaken a significant reassessment of estimated submarine performance characteristics just five weeks before a decision was made. This reassessment downgraded HDW performance estimates and upgraded those for Kockums. [5] In addition, the Australian National Audit Office detailed excessive budgetary overruns. [6] However, an evaluation by HDW later attributed these project cost increases to frequent requirement changes by the Australian Ministry of Defense. [7]

Since their commissioning, the submarines have also faced technical difficulties. In 1999, an official report identified numerous problems that included outdated combat systems and cracked propeller blades. The report concluded that the submarines did not meet combat requirements and were unfit for service. [8] In 2001, the first-of-class submarine Collins was beset by additional difficulties when over 11,000 surface and 550 sub-surface welding flaws were discovered during a general overhaul of the submarine. [9] The sections with flaws had been produced in Sweden, while corresponding sections built at ASC did not display any such problems. This led to a contractual dispute over which party would bear the costs: Kockums claimed that all cost issues were addressed in the mid-1990s, while the Australian government expected reimbursement. [10]

In 1998, the Australian government began to divest itself from its involvement in ASC. The following year, Germany's HDW reportedly reached an agreement with Australian officials concerning Kockums' 49% stake in ASC. HDW was in the process of acquiring Kockums and was interested in ASC as well. However, in November 2000 the Australian government overturned its alleged agreement with HDW and decided to execute its right to purchase the remaining shares in ASC from Kockums and JH. [11] Australian and German sources alleged that the United States pressured Australian officials, suggesting that access to U.S. technology would be negatively affected were HDW to acquire all or part of ASC. [12] At the time, several Australian submarines had already been equipped with an interim USN combat system, and the United States had also provided assistance on hull design. Canberra feared that this and future technology could be compromised if HDW took over ASC.

The government announced that it would sell ASC soon after it purchased the full shares, and took steps to privatize the yard. [13] However, the sale was delayed by the legal dispute with Kockums over repairs to the Collins and outstanding intellectual property payments, with Kockums demanding a substantially higher amount than the Australian government had expected. [14] Intellectual property questions with Kockums were aggravated by the discovery that the Australian government sent propellers and their designs to the United States for modification in 1998 and 1999. [15] The two sides settled the conflict in 2004, with Kockums paying $10 million for welding repairs to the Collins and the Australian government providing $30 million to Kockums for intellectual property rights. [16] Although Australia hoped that this settlement would pave the way to sell its stake in ASC, the sale was delayed in order to preserve momentum on existing projects, and due to the 2008 financial crisis. [17] In 2010 ASC began drastic corporate restructuring to better combine its submarine and shipbuilding divisions. [18] As part of its bid to produce Australia's new submarines, the German group Thyssen Krupp Marine Systems offered, in May 2015, to purchase and expand ASC. [19]

In a 2009 White Paper, Australia's Department of Defence announced that it would commission twelve new diesel-electric submarines to replace the Collins-class. [20] According to reports, there are four design options that Australia could pursue, involving different levels of domestic and foreign participation. The first is a military off-the-shelf (MOTS) submarine of an existing design, with top contenders being the Type 214 design from Germany's HDW, the S-80 from Spain's Navantia, or the Scorpène from France's DCNS. [21] These imports would be the most cost-efficient, but European submarines are much smaller than Australia's specifications and face different operational requirements. The second option is a modified MOTS submarine to fit Australia's strategic needs for a heavier sub with a longer range. HDW designed the new 4,000-ton Type 216 submarine with countries like Australia in mind, although no Type 216 vessels have been constructed yet. [22] A modified version of Japan's Soryu submarines, which weigh 4,200 tons, could also meet Australia's desired qualifications. [23] The third and fourth options are variants of an indigenous design by the ASC, either a modified Collins-class or a completely new submarine. Although these options would ensure greater domestic participation, they would be more expensive and more likely to experience delays in obtaining the desired capability by the time the Collins-class vessels are retired. [24] Finally, although some commentators have suggested buying or leasing Virginia-class nuclear attack submarines (SSNs) from the United States [25] the Australian government has so far maintained that it will not import nuclear submarines. [26] The current government's 2013 Defence White Paper discarded the options of acquiring MOTS submarines or of using American or British nuclear-powered boats, and reframed the issue as a choice between an "evolved" Collins-class of submarines and an entirely new class of submarines. [27] In March 2015, the Australian Prime Minister made a call for tender to France, Germany, and Japan, to build 12 submarines to replace its Collins-class vessels. The Australian government expressed a strong preference in producing the vessels indigenously instead of purchasing off the shelf submarines from abroad. [28] So far, all bidders have proposed to partially or wholly build the submarines in Australia, involving ASC shipbuilders in some capacity. [29]

Exports

Australia is not currently a submarine exporter, though it has been interested in export activities. The ASC gained significant experience and technology from Kockums in constructing Collins-class submarines. In the 1990s, the ASC expressed interest in exporting submarines to smaller countries in Southeast Asia such as Indonesia, Malaysia, Japan, Thailand, and Singapore. [30] In 1998, South Korea reportedly showed an interest in a combination of Collins-class and Gotland-class vessels. [31] However, none of these deals came to fruition. The ASC also attempted to obtain a contract to export submarines to Taiwan, but the Australian government, which has a "One-China" policy, did not grant the company an export license. [32] Depending on the technology chosen for the Royal Australian Navy's future submarine project and ASC's success in implementing it, Australia could potentially gain another exportable submarine design in the future.

Sources:
[1] Derek Wollner, "Procuring change: how Kockums was selected for the Collins class submarine," Research paper No. 3, 2001-2002, Information and Research Services, Department of the Parliamentary Library, www.aph.gov.au.
[2] A.W. Grazebrook, "Collins Class comes up down under," Jane's Navy International online edition, January 1, 1998, http://jni.janes.com.
[3] "Background Information," Australian Submarine Corporation, www.subcorp.com.au.
[4] Ian McPhedran, "Navy inflated subs' design claims," Daily Telegraph, October 9, 1998, in Lexis-Nexis Academic Universe.
[5] Lincoln Wright, "Billion-dollar boats sub-standard, says ex-naval officer," Canberra Times, May 25, 1999, in Lexis-Nexis Academic Universe.
[6] Mark Metherell and Amanda Vaughan, "Subs are still not shipshape as project wallows in sea of red ink," Sydney Morning Herald, July 2, 1999, in Lexis-Nexis Academic Universe.
[7] Peter Seidlitz and David Murphy, Business Times (Singapore), February 10, 2000; in Lexis-Nexis Academic Universe.
[8] Malcolm K. McIntosh and John B. Prescott, "Report to the Minister for Defence on the Collins Class Submarine and Related Matters," Commonwealth of Australia, June 1999, www.defence.gov.au.
[9] Geoffrey Barker, "Subs Saga Plumbs New Depths," Australian Financial Review, July 2, 2003, www.lexisnexis.com.
[10] Leanne Craig, "Submarine Dispute Heading to Court," The Advertiser, July 4, 2003, www.lexisnexis.com.
[11] Max Blenkin, "Fed: Government to continue discussions with Germans over subs," AAP Newsfeed, 6 April 2000, Lexis-Nexis Academic Universe.
[12] Michel Richardson, "Australia struggles to get its submarines shipshape," International Herald Tribune, www.iht.com.
[13] Melissa King and James Grubel, "Sub firm to be floated; Federal plan to sell half the shares," The Advertiser, June 28, 2000, in Lexis-Nexis Academic Universe; "Fed: Gov't could sell ASC within months, despite dispute: Hill," AAP Newsfeed, May 6, 2003, in Lexis-Nexis Academic Universe.
[14] Leanne Craig, "Submarine dispute heading to court," The Advertiser, July 4, 2003, in Lexis-Nexis Academic Universe; Geoffrey Barker, "Subs saga plumbs new depths," Australian Financial Review online edition, http://afr.com.
[15] "Top secret propellers sent without designer's permission," AAP Newsfeed, March 15, 2001, in Lexis-Nexis Academic Universe; Gavin Lower, "Subs' secret design given to Americans," The Advertiser, March 16, 2001, in Lexis-Nexis Academic Universe; David Lague, "Sweden goes to war: Australia blasted over submarine secrets," Sydney Morning Herald, December 29, 2000, in Lexis-Nexis Academic Universe.
[16] Geoffrey Barker, "Collins Deal Clears Decks for ASC Bid," Australian Financial Review, June 28, 2004, www.lexisnexis.com.
[17] Paul Starick, "Subs Deal All-Clear; ASC Bid Strength Increases," The Advertiser, June 28, 2004, www.lexisnexis.com; Patrick Walters, "No Early Sale of Warship Builder," The Australian, August 3, 2006, www.lexisnexis.com; John Kerin, "Sale of $700m ASC Stake Stalls," Australian Financial Review, April 28, 2008, www.lexisnexis.com.
[18] John Kerin, "Shake-up at Navy Shipbuilder," Australian Financial Review, April 7, 2010, www.lexisnexis.com; "ASC Restructure," ASC News Release.
[19] "Thyssen Krupp says it wants to buy Adelaide's ASC as part of submarine construction," News.com.au, May 21, 2015, www.news.com.au.
[20] "Defending Australia in the Asia Pacific Century: Force 2030," Australian Government Department of Defence, Defence White Paper 2009, www.defence.gov.au.
[21] David Ellery, "U-boats May Be on Navy's Submarine Shopping List," Canberra Times, December 29, 2011, www.lexisnexis.com; David Ellery, "Kockums Out of the Loop for Sub Contract," Canberra Times, February 18, 2012, www.lexisnexis.com.
[22] David Ellery, "U-boats May Be on Navy's Submarine Shopping List," Canberra Times, December 29, 2011, www.lexisnexis.com.
[23] Hamish McDonald, "Seventy Years after Deadly Raid, Japanese Submarines May Partner Australian Fleet; The Price of Security," Sydney Morning Herald, July 9, 2012, www.lexisnexis.com.
[24] Andrew Davies and Mark Thomson, "Mind the Gap: Getting Serious about Submarines,"Strategic Insights, 57, April 2012, www.aspi.org.au; Ross Babbage, "We'll Be Sunk If We Don't Choose the Best Submarine," The Australian, January 17, 2012, www.lexisnexis.com.
[25] John Kerin, "Nuclear Subs Back on the Table," Australian Financial Review, March 8, 2012, www.lexisnexis.com; Ross Babbage, "We'll Be Sunk If We Don't Choose the Best Submarine,"The Australian, January 17, 2012, www.lexisnexis.com; Christopher J. Skinner, "Nuclear Solution for Sub Capability Gap," Australian Financial Review, April 23, 2012, www.lexisnexis.com.
[26] John Kerin, "U.S. Floats Nuclear Subs Option," Australian Financial Review, February 22, 2012, www.lexisnexis.com; John Kerin, "Controversy Unabated over New Submarine,"Australian Financial Review, June 21, 2012, www.lexisnexis.com.
[27] "2013 Defence White Paper," Australian Government Department of Defence, Defence White Paper 2013, www.defence.gov.au.
[28] John Kerin,"Japan to hand over secret submarine data to Australia", Australian Financial Review, May 7, 2015, www.afr.com.
[29] "Thyssen Krupp says it wants to buy Adelaide's ASC as part of submarine construction," News.com.au, May 21, 2015, www.news.com.au.
[30] David Lague, "Submarines Lift Export Hopes," Sydney Morning Herald, November 7, 1994, www.lexisnexis.com.
[31] David Moodie, "Korean Navy looks at buying three of our subs," The Advertiser, October 30, 1998, in Lexis-Nexis Academic Universe, www.lexis-nexis.com.
[32] Michael Foster, "ASC Bid to Sell Boats to Taiwan," The Advertiser, October 7, 1994, www.lexisnexis.com.

September 23, 2015
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The submarine proliferation resource collection is designed to highlight global trends in the sale and acquisition of diesel- and nuclear-powered submarines. It is structured on a country-by-country basis, with each country profile consisting of information on capabilities, imports and exports.

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This material is produced independently for NTI by the James Martin Center for Nonproliferation Studies at the Middlebury Institute of International Studies at Monterey and does not necessarily reflect the opinions of and has not been independently verified by NTI or its directors, officers, employees, or agents. Copyright 2017.